Don’t expect another commodities supercycle but oil at $60 is better than $30 for your portfolio – by Olev Edur (Financial Post – February 15, 2017)

“We’ve had a ten-year supercycle and then a five-year blow-off.” That’s how Drummond Brodeur, senior vice-president and global strategist with Signature Asset Management (a division of CI Investments) in Toronto, succinctly sums up the past 15 years for Canadian markets.

While the panic selling of early 2016 gave way to something of a rebound throughout the rest of the year — a “still alive bounce” — Brodeur offers an even more succinct summary of the outlook for Canadian markets going forward: “Meh.”

“We saw oil go down below US$30 and now it’s back to US$50, but it’s not going back to US$100 any time soon,” Brodeur says. “Maybe US$60, but we won’t see a resumption of the supercycle that occurred between 2001 and 2011. It’s not exciting, but US$60 is a lot better than US$30, and the market should be much more stable going forward.”

Terry Dimock, head portfolio manager at National Bank Investments in Montreal, agrees: “If you look at energy supply and demand, the recent OPEC (deal) may support slightly higher prices, but given all the producers in the U.S. will come back on line if the price is right, this puts a cap on prices. Most experts suggest that as supply and demand come into equilibrium, the likely range over the long term will be US$50-60. But to try to call it over the short term is almost impossible.”

Demand for other commodities will remain muted too, at least in the short term, according to Dimock. “It’s important to monitor global growth, which is tempered on the upside,” he notes, “Demand from China is decelerating as they switch away from infrastructure spending to a more consumer-driven economy.”

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